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Finnish Sulake aims to cash in on networking boom

Internet company Sulake plans to list next year on the back of strong investor demand for social networking sites, the Finnish firm said on Monday, after it said it bought social networking firm Dynamoid Oy.

Sulake, which had 2006 sales of 38.5 million euros ($52.2 million), said it will be the largest Internet company in the Nordic region after the deal.

The company -- known for its Habbo Hotel teenager-networking Web site -- aims to list its shares next year, with London and Helsinki the most likely options, its chairman Jussi Nurmio said.

"Internet, distribution, community -- that's what is interesting for the investors," Nurmio told Reuters on sidelines of a news conference.

Analysts see Internet social networks as a key element in the future of the media business. News Corp.'s 2005 acquisition of MySpace has boosted the value of Rupert Murdoch's media conglomerate as a whole.

Sulake's chief executive, Timo Soininen, said the company was working to make itself ready for the listing, targeting a 20 percent profit margin for earnings before interest, tax, depreciation and amortisation by the end of 2007.

"Within the next eight to 16 months is our aim (to list)," Soininen said.

Analysts said the company would be worth several hundreds million euros.

"It could well become Finland's largest software company by market cap," said one senior software industry executive who wished not to be named. Finnish data software firm F-Secure has a market capitalisation of 307 million euros.

Chairman Nurmio declined to comment on the valuation.

"It is quite hot being in the internet community business. I think it is likely to provoke a lot of interest," said analyst Tuomas Ratilainen from Carnegie.

Habbo Hotel ( http://www.habbo.com/ ) has over 7 million monthly visitors, with an average age of under 16 years and spending an average one euro a year on the site.

Dynamoid runs Finland's most popular social networking site, IRC Galleria, which has more than 400,000 registered users, who spend on average around 20 hours a month on the site.

Sulake's CEO said he was not worried about sales growth slowing to just 29 percent in 2006, after it at least doubled its revenues for several years.

"I think we have a good chance to continue growing at a super speed, over 50 percent a year," said CEO Soininen. "In the United States we have only scratched the surface. Our advertisement sales are only at the beginning and also the acquisition gives a boost."

Dynamoid has started networking sites in Russia and Germany and Sulake said more will follow shortly. Sulake has operations in around 20 countries.

Sulake's main owners are Finnish advertising agency Taivas, which is partly owned by British giant WPP , venture firms 3i and Benchmark Capital, and telecoms operator Elisa . (Additional reporting by Sami Torma in Helsinki and Kenneth Li in New York)